Greetings, and welcome to Marriott Vacations Worldwide Second Quarter 2021 Earnings Conference Call. As a reminder, this conference call is being recorded. It is now my pleasure to turn the conference over to your host, Mr. Neil Goldman. Thank you.
You may begin.
Thank you, Rob, and welcome to the Marriott Vacations Worldwide 2021 Second Quarter Earnings Call Conference Call. I am joined today by Steve Weisz, Chief Executive Officer and John Geller, President and Chief Financial Officer. I need to remind everyone that many of our comments today are not historical facts and are considered forward looking statements under federal securities laws. These statements are subject to numerous risks and uncertainties as described in our SEC filings, which could cause future results to differ materially from those expressed in Forward looking statements in the press release that we issued last night and the presentation we added to our website are in the call are effective only when made and will not be updated as actual events unfold. Throughout the call, we will make references to non GAAP financial information.
You can find a reconciliation of non GAAP financial are referred to in our remarks and the schedules attached to our press release as well as the Investor Relations page of our website
Thanks, Neil. Good morning, everyone, and thank you for joining our Q2 earnings call. As a reminder, this is the Q1 with WELK and our results, And we couldn't be more excited about the opportunity it provides us as we look to significantly expand our Hyatt vacation ownership business. Today, more than ever, people want to vacation to see new places, reunite with family and friends or just to relax And the products we offer, most with extra square footage in a resort setting are resonating with them. Participants could also lead to new owners with first time buyer sales growing faster than existing owners this quarter.
With occupancies and contract sales in many of our North America locations ending the quarter at or above 2019 levels, We've been able to return our focus back to the transformational initiatives that will help drive long term growth and improve margins, Many of which are digitally enabled. Before I get too deep into those efforts, let me quickly review our Q2. Starting with our vacation ownership business, occupancies continued to improve in a number of key markets during the quarter. As we've discussed in the past, our 2 largest markets, Hawaii and Orlando, which combined represent more than 40% of our North American keys, With Hawaii running over 90% occupancy and Orlando running more than 85% with both locations either in line or are participating in June 2019 levels. Our Florida Beach and U.
S. Virgin Island Resorts averaged 95% for the quarter, each are above 2019. And our mountain and desert resorts were nearly 90% during the quarter, well above 2019 levels. Even our urban locations saw substantial improvement as the quarter progressed with San Diego and Boston exceeding 85% occupancy With the strong improvement in occupancies, we grew contract sales by 60% on a sequential basis We were only 6% below pre pandemic levels. First time buyers represented more than 30% of 2nd quarter contract sales, Up more than 500 basis points from the Q1, which is very encouraging.
As we've illustrated in the past, First time buyers have historically doubled their revenue contribution within the 1st 5 years of their initial purchase. So it's nice to see the mix continue Now more than ever, the product we sell is resonating with customers. This was clearly evident in our VPG this quarter, which was more than $1,000 or 30% higher than 2019, business were in line with our expectations this quarter. Members at Interval International declined on a sequential basis, primarily due to the non renewal Of the corporate account we talked about in February, interval exchange transactions were down sequentially due to normal seasonality, Well, we're only down 1% compared to the Q2 of 2019 and average revenue per member was up 7% from 2 years ago. We're often asked by investors how long we think this resurgence will last.
While it's hard to answer with clarity, timeshare is still an underrepresented part of the broader leisure market And is resonating with Travelers now more than ever. In addition, people have more money in their pockets and they're just beginning to travel again. At the same time, our core customer arguably was less impacted by the pandemic. I also believe that our core product offering, which combines the benefits of staying at a fully amenitized branded resorts in a highly desirable location with added square footage I do think the current environment has legs and we are well positioned to take advantage of the opportunities that lie ahead of us. With the recovery in full swing, we've been able to turn our focus back towards many of the growth initiatives we paused last year.
If you remember our Investor Day back in October 2019, we spent considerable time talking about the substantial have to apply cutting edge digital tools to drive growth and improve margins. We've recently restarted much of that work I'm excited about the opportunity we have in front of us to continue to transform our business. I'll give you a few quick examples. Our customers have been moving into a digital world and they expect us to move with them. 2 years ago, less than half of our points reservations were made online.
However, as we accelerated our digital customer initiatives last year, it helped drive a substantial increase in online points transactions. Today, 60% of Points reservations are being made online and I expect that to continue to grow in the future. We will soon be enhancing the capabilities for customers to not only buy their vacation preview packages online, but to book them as well. While we believe some customers will always want to speak with a live agent, this tool offers substantial growth opportunity for our business will begin to roll it out later this year. We're leveraging leading edge tools from companies such as Salesforce and Adobe We recently relaunched our social media efforts on Facebook and Instagram.
Our objective here is to leverage these low cost targeted channels to build and optimize our preview package pipeline, focusing on generating high quality tours to drive future contract sales. We continue to expand the use of technology to lower our back office costs and improve our associates' experience By leveraging artificial intelligence to augment and automate many of our high volume internal transactional processes. And we're making good progress on the technology needed to link our Marriott, Westin and Sheraton products into a single points based offering in early 20 are going forward, we will continue to increase our use of these digital tools to strengthen our infrastructure, grow online package sales, enable self-service bookings, make real time offerings, enhance the overall customer experience and drive back office efficiencies. But innovation at MVW isn't limited to our vacation ownership business. In our Exchange and 3rd party management segment, Nearly 60% of Intervals Exchange and Getaway transactions have been done online this year and we expect that to continue to grow.
We are implementing Adobe to enhance our cross channel customer experiences and improve our ability to more effectively market to members based on a more integrated view of their activities. And as we mentioned last quarter, Interval recently introduced short stay getaways, which allows members to book their vacation for less than 7 days. This program offers members greater flexibility when renting through interval, While allowing us to be more efficient in our rental programs. While still early days, short term getaways represented more than 5% of the total second quarter rentals and we're finding a lot of members using short term getaways as a way to extend their stay beyond the week, Which is a new incremental usage case. So let's talk about where the second half might look like And when we think we can get back to pre pandemic levels again.
We continue to be very encouraged with the improvement of our business. Exceeded their 2019 levels in June. Reservations in our urban locations are building nicely for the second half of the year, The recovery in our international locations continues to lag the United States. We sold 60% more are in the Q2 than we did in the Q1 and ended June with more than 200,000 tours in our package pipeline, preview reservations on the books for the second half of this year than we did at the same time in 2019. And bookings already for next year are very strong.
Interval is continuing to work to enhance the technology to significantly expand its addressable market beyond timeshare As we move through the balance of this year and we look forward to sharing more specifics with you. And we are working diligently to integrate Welk into our are in the same period of time. There is more work to be done, but we have made great strides in setting the groundwork to re flag the resorts, The second quarter strength has continued into July with VPG remaining well above 2019 and our research continues to point are very strong leisure trends in North America. For example, over 47,000,000 Americans traveled over the July 4th weekend with Orlando are topping the list of destinations. 42% of households say they are better off financially than they were a year ago And 45% feel now is a good time to spend money on leisure travel.
Google search queries for resorts And hotels are higher than they've been in 5 years. 3 out of 4 of our owners say they are ready to travel in the next 90 days, While over 90% of interval members surveyed said they plan to travel in the second half of the year. Consumer confidence hit a record high in the Q2 of 2021, which is very positive for our business and a growing percentage of people returning to work all of this points to continued strong growth and gives us optimism about the balance of the year. With that, I'll turn the call over to John. Participants.
Thanks,
Steve, and good morning, everyone. Today, I'm going to review our 2nd quarter results, The continued strong recovery across our businesses, the strength of our balance sheet and liquidity position and our Q3 expectations. As Steve mentioned, this is the first time we have WELK in our results and their performance exceeded our expectations this quarter. Given the relative size of WELK, we won't be providing pro form a results, but we will talk about certain items where WELK significantly impacted the quarter. Moving to our Q2 results, I'm very happy with our performance with most of our business approaching 2019 profit levels.
Looking first at our vacation ownership business, we're seeing more people vacationing at our resorts. As Steve noted, our 2 largest markets, Orlando and Hawaii, participants are participating in the quarter at or above 2019 occupancy levels illustrating the resilience of our leisure focused business model. And with majority of our contract sales coming from people staying at our properties, we drove increased tours and contract sales in the quarter. We grew contract sales by 60% compared to the Q1 to $362,000,000 Including $31,000,000 from wealth. We're seeing more new faces at the sales table, which is good for the long term health of our business, While owner tours also continue to grow nicely.
VPG was well above pre pandemic levels in the 2nd quarter, Illustrating how well our product is resonating with customers. Though with the mix of first time buyers beginning to normalize as well as the addition of Welk, It was down slightly on a sequential basis as we expected. Development profit was $65,000,000 in the quarter and margin was 22% despite $13,000,000 of negative reportability, which we don't adjust when reporting results. Excluding revenue reportability, adjusted development profit more than doubled on a sequential basis to $81,000,000 And more importantly, margin was 26%, approximately 240 basis points above 2019. This was despite lower contract sales and highlights the benefits of more efficient marketing and sales spending, lower inventory costs Our rental business also improved nicely in the quarter.
Revenues increased 43% sequentially With growth coming from both higher transient keys rented and revenue per available key. As a result, we reported $15,000,000 of rental are in the quarter. The stickier revenue businesses within our vacation ownership segment also performed well in the quarter. Resort Management profit increased $18,000,000 sequentially driven primarily by the substantial improvement In our ancillary business, which was nearly back to 2019 levels and the inclusion of wealth this quarter. And financing profit increased 20% compared to the Q1, primarily due to the inclusion of wealth.
But more importantly, profit was in line with Q2, twenty nineteen. Excluding WELK, our notes receivable balance during the month of June as originations exceeded repayments for the first time since the pandemic started. Delinquency rates also continued to decline sequentially during the quarter with delinquencies for the Marriott Vacation Club At one of the lowest levels we've seen in the past decade and Sheraton and Weston are at the lowest levels we've seen since we acquired them back in 2018. As I mentioned, we're not providing detailed results for the wealth business given its relative size. However, I did want to highlight that the vacation ownership results I just discussed included $12,000,000 from WELK, As a result, total adjusted EBITDA in our Vacation Ownership segment increased participants are subject to a $182,000,000 90% of the EBITDA that we delivered In the Q2 of 2019, the 2nd quarter benefited from the strong improvement in contract sales, rentals and ancillary participants are participating in the impact of our business transformation and synergy savings.
Turning to our Exchange and Third Party Management As expected, adjusted EBITDA declined $4,000,000 compared to the Q1. While active members declined on a sequential basis, Interval also saw positive trends from its developer partners, which helps drive new members. In fact, Interval added are 20% more new members than it did in Q1 and we continue to work hard to add more resort affiliations to the system. After adjusting for share based compensation expense and certain pandemic related expenses, corporate G and A expense increased $7,000,000 $17,000,000 sequentially, primarily related to reinstating our variable compensation plans, As well as the inclusion of WELK. In total, adjusted EBITDA more than doubled in the quarter on a sequential basis to $164,000,000 with margin approaching our Q2 2019 even with lower revenue, This is demonstrating the strength of our business model, the recovery in leisure travel and the benefits of our synergy initiatives.
Are to our goal of at least $200,000,000 which we expect to achieve by early next year. Moving to our balance sheet, In June, we issued $500,000,000 of 4.5 percent senior notes due 2029 to refinance our 6.5 present senior notes due in 2026 extending our maturity profile and saving us $10,000,000 a year. Pro form a for those transactions, we ended the quarter with $780,000,000 of cash and total liquidity have nearly $1,500,000,000 including gross notes receivable eligible for securitization of $97,000,000 After adjusting for the July debt repayment, we had $4,800,000,000 of debt outstanding at the end of the quarter, comprise of $3,000,000,000 of corporate debt and $1,800,000,000 of non recourse debt related to our securitized notes receivable. With the continued strong recovery in earnings, the higher free cash flow conversion we're anticipating from our excess inventory As well as the cash on our balance sheet, we've been preparing to return to a balanced capital allocation approach. We are currently evaluating exiting the covenant waiver under our revolving credit facility early as well as a combination of repaying some of the $1,000,000,000 of debt we issued since the pandemic began and returning cash to shareholders.
Looking ahead, while we're not giving guidance, I do want to help you think through the rest What the rest of the year could look like. Our vacation ownership business continues to recover nicely and we expect that to continue this quarter. With occupancies in Orlando and most of our U. S. Beach and mountain resorts ending the quarter atorabove2019levels, we expect tours will continue to grow in the second half, while VPGs will continue to normalize, but remain well above pre pandemic levels.
As a result, we expect contract sales to grow to between $380,000,000 $410,000,000 in the 3rd quarter, Finally, there are some near term headwinds to consider as you think about the rest of the year and the path back to 2019 adjusted EBITDA. Participants are in the range of $1,000,000,000. We expect contract sales and rental revenue to remain below are in 2019. In our North America business, in order to get more of our owners back on vacation, we decided early in the pandemic to allocate more have returned to the owners as demand recovered. As a result, with the strong owner demand we're seeing for the rest of the year, We expect rental profit to remain below 2019 and in our exchange and third party management business, We expect greater owner usage to reduce available inventory for exchange, which will impact our revenue and profit in the short term.
As a result, while we do expect adjusted EBITDA to grow sequentially in the Q3, these factors could keep us from getting all the way back to the $190,000,000 of adjusted EBITDA we generated in Q3 2019. The good news is we expect these headwinds participants continue to abate as we move into 2022. Finally, while we're not providing free cash flow guidance today with more than $650,000,000 of excess inventory, I would expect our adjusted EBITDA to adjusted free cash flow conversion will be well above our normal 55% range for a number of years. With that, we'll be happy to answer your questions. Rob?
Thanks, John. At this time, we'll be conducting a question and answer
are ready to take questions.
Our first question comes from David Katz with Jefferies. Please proceed with your question.
Participants
Okay. David, are ready. Our next question comes from Patrick Scholes with Truist Securities. Please proceed with
your question.
All right. Good morning, everyone. I am here. Thank you.
Couple of questions here. Sort of a little bit long term modeling related questions. How should we think about At a high level, thinking about what that loan portfolio balance is versus 2019, certainly you've had lower sales this year unless a lower loan balance, but you've had the Welk acquisition. Participants From a sort of a high level modeling perspective, how to think about next year's net interest income versus again 2019?
Participants. Sure Patrick, good morning. Yes, as we did in the quarter, financing profit in the second quarter obviously with the additional WELK participants was basically flat to the Q2 of 2019. The good news is I mentioned, given our recovery in contract sales in the 2nd quarter, all participants All the way almost all the way back to pre pandemic levels and the guidance we just gave, we do expect contract sales to be running at or above 'nineteen. Participants And in June, as I mentioned, our legacy MDW note balance kind of hit the equilibrium and originations because of where we're at on contract sales exceeded normal loan repayments, right.
So the balance should grow going forward on the legacy MVW. Participants Even if we hadn't done the Welk acquisition, my back of the envelope, obviously, a lot of different assumptions go into this on continued contract sales growth and kind of where we're at today. But I would expect that legacy MVW on its own would have been back to close to are in 2019 levels from a financing profit in 2022 and Welk is going to be growth on top of that. We acquired about $240,000,000 Gross notes receivable in the Welk acquisition. So hopefully that gives you some detail around what you're looking for.
Okay. That's very helpful. Just want to make sure we're all modeling that correctly. And then related somewhat related for 2022, How should we think about the ongoing earnings hit from you lost a corporate client in the RCI membership, how should we think about that earnings hit? And then also, from member loss over the past year and a half, I guess, again, as compared to sort of what it was in 2019.
Yes. Patrick, this is Steve. I think you're referring to the Diamond
And lost members over the past year and a half, what is sort of the run rate so we can sort of match it up 22 expectations for 2019 again? Thank you.
Participants Let me speak to the Diamond thing specifically and then I'm sure John can chime in a little bit on the EBITDA side of things. So, Diamond was 165,000 members, roughly 10% of the interval Membership at the time that they lost. We were able to retain 29,000 members From that 165,000 in interval who continue to want to keep their membership with us. I should also point out that the 165,000 only 15% of those were actually active exchangers. Now 165,000 members, you do get the annual corporate membership fee, which has It's not the lion's share of what you get from membership, but it certainly is important money.
But the real money made in the exchange businesses on a transaction basis when people go to exchange. So, we believe that at It's really going to be relatively de minimis in terms of the financial impact from Diamond. Now with that said, there were others that Because of you have normal attrition in the exchange business, that happens every year. Typically speaking, what happens is, As new developer sales happen, you have new memberships that are gained and under ideal circumstances, the new members outweigh the normal attrition. Obviously, in 2020, there were very few new member additions being made across the affiliate network And you still have the continued attrition.
So there will be some leakage at the EBITDA side. So I think John may be able to Chime in a little bit with some additional numbers.
Yes. I mean, as Steve walked through, obviously, a lot of moving parts and assumptions there about The average revenue per member of the members that left and all those things. But if you take a step back up to 30,000 feet and you look at EBITDA that segment delivered in 2019 and kind of what we expect to deliver this year. I would say that the loss of members participants From an EBITDA perspective, it's probably roughly $25,000,000 of EBITDA give or take is kind of the back of the envelope as we look at it. But like I said, there's a lot of assumptions that potentially could go into that number.
So I try to keep it are a bit high level.
Okay. Very good. I really appreciate the color. Just last quickly here, when you had made the WELCOME announcement Earlier this year, you had at a high level targeted $29,000,000 of EBITDA I'm sorry, doubling the 20 9,000,000 EBITDA over 3 to 4 years. Would you say at this point you're ahead of that, in line or behind, which I probably don't think you are, but Would you think you're ahead of that original expectation or in line with it at this moment?
Yes. In terms of how we Underwrote at least for the 1st year here, obviously, we didn't expect the recovery and that's really what you're seeing right now. We're outperforming our expectations, But it's just how strong the recovery is and WELK is all North America. So they don't have some of the international exposure that we have. Our North America business essentially recovered if you will in terms of contract sales back to pre pandemic levels too.
So They're outperforming there. In terms of the integration, a lot of the synergies, the upside to that, that's all still to come. Our goal is to get The resorts and the Points Club at Welk rebranded to Hyatt early next And so a lot of work on that front. That's going to unlock a lot of the development margin improvement we've talked about And our ability to leverage the more cost effective branded channels we get through the Hyatt system. So that's a lot of the participants And then overall, there are some other synergy and integration savings we'll get over time.
But The upside if you will is really yet to come. The outperformance is just that the overall business is recovering quicker And performing quite frankly kind of better than they were seeing back in 2019 at this point.
Patrick, certainly The things that we have seen would cause us to be any less optimistic about what we called out when We did the acquisition 4 months ago.
Okay. Good to hear. Thank you
very much. I'm all set. Thank you. Thanks.
Our next question comes from Ben Jauken with Credit Suisse. Please proceed with your question.
Hey, you mentioned some digital initiatives on the sales process. I think this is different than digital call transfer. Participants can we just dig into this for a second, how exactly it would look? Is this like serving a Facebook or Instagram ad and then allowing a consumer to book purchase a mini vac or is this actual timeshare sales process, meaning someone could buy a $25,000 timeshare if they wanted on their phone?
Participants It's the former, not the latter. And you have it very well characterized. The great news about Facebook, Instagram and there are some other platforms out there that we're experimenting with is that you do have the ability to selectively target Who you want to put an offering in front of and as well as what offer you want that to be. And as a result, it is to generate preview packages, which in turn, As they come through the house and do their tour, etcetera, hopefully generate a good sale. It's a cost effective way to sell preview packages.
It gives you broader distribution than some of the traditional methods that timeshare operators have used in the past. And we're very encouraged by what we see by them.
It seems like kind of like exciting and maybe obvious Channel, was there a hurdle that maybe you couldn't that was preventing you historically from using it or just evolution of the business? Or can we talk about that?
Participants No, it's more about evolution of the business. I mean, I think if you may remember back in the October of 2019 Analyst Day, We talked about some early experimentation we had done. And let's be honest, both in both of those platforms in particular, they've advanced their and their ability to target customers, a lot better than they used to be as well. Obviously, in 2020, We stood down from a lot of that because to be honest with you, people weren't interested in thinking about booking a preview package to buy timeshare when they were in the midst of the pandemic and all the concerns about jobs and everything else. So, but we've started we started to dial it back up participants are well engaged in it now.
And we're very pleased with what we're seeing so far.
Got you. I appreciate it. One more,
if I may. You also mentioned the single platform kind of bringing all the brands under one umbrella. This seems like Another very interesting kind of tailwind as well. Is it too early to talk about some of the top line benefits? It seems like I I don't want to necessarily steer the conversation, but it seems like this could benefit closer rate and price and just the consumer value proposition overall.
So just hoping to get your perspective there.
You've touched on several that are not only logical, but somewhat obvious. And this is again, this is 3 of the 4 brands. It would not include Hyatt by virtue of our license agreement and everything else, but the Sheraton Westin And Marriott Brands into a single platform, and we believe that it does increase the customer value proposition. We believe that it should help improve close rates. And there ergo, you'd like to think that it'd have a nice impact on things like VPG.
Participants But again, we're talking about rollout early next year. We're very pleased with the progress we're making all the bits and pieces behind the scenes that we have to put in place in order to get this thing together. But between what we would think logically as well as some customer research we've done, we think this will resonate very well with not only our existing owners, But new owners as well.
Okay, cool. I appreciate it. Thank you.
Thank you.
Our next question comes from Brandt Montour with JPMorgan. Please proceed with your question.
Hey, good morning, everyone. Thanks for taking my questions. Obviously, strong results contract sales in VPG, especially given the new owner mix shift, positive mix shift that you called out. Participants what would you say where would you say 2Q VPG would have shaken out ballpark, If you would have normalized completely to historical mix levels, knowing what you know about consumer demand and their propensity to buy and close right now.
That's a great question.
Participants Without taking So you're looking for if we were back at more of a sixty-forty or fifty five-forty five Mix of owners to first time buyer sales, how would that blend out in terms of how much lower VPG would go all as being equal?
I'm trying to isolate the lift to VPG from the elevated close rates in today's consumer environment.
Participants Yes, that's always hard to try and figure out how much of the close rate is the environment, right, We're not. So I don't know. It's an interesting question, Brad. I'm not sure we have a good answer off the top of our heads. Participants
Fair enough, fair enough. Don't worry, I have another one.
When you think about 2022 and building back international and Asia is all the way back to where you want it. But hypothetically, you would have called some of the lower yielding channels. Can you give us a sense order of magnitude how much of that channel calling would lower on an absolute basis next year versus 2019. And then you said contract sales should be running ahead of 2019. So clearly whatever it is, is going to be offset by higher VPG.
But is that the way we should think about it? And then maybe you could help us quantify that delta?
Yes. Without getting into the numerics, let's kind of be at 20,000 feet on concepts. We have shut down with the exception of Hawaii virtually everything in OPC, which is As I think you know, a relatively high cost, low yield channel and we don't envision turning that stuff back on For the foreseeable future. I think we've learned a valuable lesson if there is something to be said about Having gone through things like we went through in 2020 that we realized that we can in fact, we live in an environment with Fewer low yield tours and put our focus more on the higher yield channels that we really benefit from. The hotel environment continues to struggle with its rebound.
And depending on who you listen to, there are some saying it's 23, 24 before hotels kind of get back to some sense of normalcy. So, participants We have been very judicious about looking at turning back on linkage channels, which in 2019, If my memory serves me correct, I think produced about $100,000,000 worth of sales force. And we won't turn on a new linkage participants are in a given market unless we can convince ourselves that there is enough have good traffic and volume in the hotels to be able to warrant it being open on a cost effective basis. The flip side is on the Encore side of the business, which is Really one of the most vibrant channels for us in terms of producing high yielding tours, etcetera. That encore channel has continued to actually grow.
In fact, in the second quarter we actually booked more Encore tours than we actually had come through the house, so we're adding that. And Encore has a very high VPG to it. Participants So, if you put all those together, again, I haven't given you any numbers because quite frankly, we've just kind of gone through the process of planning for the second half of this year. We haven't really begun the process of going through the budgeting and channel optimization and everything else for 2022. But I think I should give you some sense of where we're going to continue to put our focus and go from there.
Participants Yes, I think, Brad, to your question, while we could give you how many tours in a vacuum we might not get back from OPC and some are less linkage. Steve's point, we're doing all this stuff to more than offset hopefully the losses, right? And that's where we'll get more participants are going to be selling packages is a big one. And so, you got to look at both sides, right? Our goal always was to get rid of OPC.
Obviously, We were doing that over time and then COVID hit and deceased when we turn that stuff up. But we always said as we got rid of OPC, We were ramping up other channels, the digital marketing channels, the Encore packages and all that. So we'll update you as As we get later in the year, what the outlook looks like for getting back to 2019 tours, which I think is your question. But we've got a lot of moving parts right now and we expect to Hopefully get closer to back to the 2019 tours, but once again VPG being 30% above 2019 At least right now and it will continue to normalize to your first question, we're not giving you what that could look like. Those are obviously the 2 moving parts that we're are continuing to work through as we think about 2022.
Great. Thanks for all the color.
Thank you.
Our next question is from David Katz with Jefferies. Please proceed with your question.
Hi. Good morning, everyone.
I wanted
to maybe put this on John. You do securitization deals, participants Right, that are at ever improving terms, right? And I think it's hard to argue that they aren't super compelling terms. And yet at the same time, sort of the equity response, I think, is fair to say inconsistent. Participants I'd love for you to just talk about what those that investor base asks about.
What are their Likes and dislikes and concerns, what are those discussions like compared to the discussions that we have On the equity side, because there right there's always been and there is now sort of a growing divide Seemingly and how those are priced?
Sure. Yes, Obviously, right now, we have seen a lot better terms. The deal we just did at 1.5%, 98%, Advance rate on the notes was by far the best deal we ever had. Obviously some of that's the interest rate environment we find ourselves in right now. But when you look at the investors we meet with and we've been doing securitizations now 20 plus years, right.
We've got and what's helped improve the economics over time is, we have more and more investor interest, right. We've got folks that have been in our program for the entire time and continue to be in the program as you're well aware of David, I'm not aware of anyone ever losing a dollar on a timeshare securitization deal. That's a fact, right? You've had a lot of ups and downs and you've seen how the notes performed through some pretty turbulent times, whether it was the financial crisis and now more recently in COVID. And I'm not just talking about our notes, participants But notes in general from an industry.
So when you have that performance over time, right, it draws more and more interest. Notwithstanding how good our terms are, on a risk adjusted basis, investors can get a little bit better yield, Right. So when we talk to them, they know our program, most of them. They know how well the business performs participants And they know, while we don't have to buy out the defaulted notes, just given our inventory model and our need for inventory to fuel future sales, participants It's a very efficient program. And so that gives you a little bit of the color, I think high level in terms of what we're here and see.
And apologies if I missed earlier. What have you indicated about when there could be a next securitization The deal forthcoming, how far out that might be?
Yes. No, we haven't. But from a historical basis, With ILG, call it pre COVID, right, we would do, call it 2 a year, right? We did one earlier this year. Given the contract sales guidance We gave you, right, we're originating notes now back to kind of where we were pre pandemic.
So I think we're back on the cadence For 2 a year, so the goal would be to do another one here, and I'll call it in the 4th quarter.
Excellent. Appreciate it. Thank you very much.
All right. Thank you.
We have reached the end of the question and answer session. At this time, I'd like to turn the call back over to Steve Weisz for closing comments.
Thanks, Rob, and thank you everyone for joining our call today. Whether it's to relax or just be with family and friends, People make time for vacation and coming off last year, it's never been more true or more important. For some people, the way they vacation has changed and we're finding that the products we offer are resonating with customers more than ever before. It's evidenced in our occupancies, our sequential growth and our VPGs. A quick review of our 2nd quarter gives you a sense of that.
We grew contract sales by 60% sequentially and were within 6% of the Q2 2019 contract sales, While VPG was more than $1,000 above 2 years ago. We're also seeing strong growth from both participants are in the same store. Interimally exchange transactions were within 1% of 2019 levels, While average revenue per member was up 7% over the same time period. Adjusted EBITDA more than doubled compared to the Q1 With margin nearly back to 2019 levels and the Q3 has started off strong. With this strong recovery, we've turned our focus back to the digitally enabled transformational opportunities we still have in front of us We're also laying the groundwork to return to a more balanced capital allocation strategy, As always, thank you for your interest.
Take care of yourselves. And finally, to everyone on the call and and your families stay safe and enjoy your next vacation.
This concludes today's conference. You may disconnect your lines at this time